VAT de-registration and assets

In this week’s Ask LCM we will be looking at VAT de-registration and assets. 

The purpose of these posts is to give a quick and simple answer to a recent question that we have been asked.

Each week we will answer one question in a post that you can read in less than 5 minutes.

We aim to provide a space where people can find answers to many of the questions that hold them back, where people can learn and progress.


VAT de-registration

VAT deregistration is when a business cancels its active VAT position with HMRC.

Sole traders, companies and partnerships can all de-register from VAT as long as they meet certain criteria.

In its simplest form, a business can de-register for VAT if its taxable turnover falls below £83,000.

A business must de-register for VAT if they cease to trade or stop making taxable supplies.  Furthermore, a business must de-register if they join a VAT group.

The process to de-register is usually a quick and simple process and can be done online or by post.

The link to de-register from VAT is below:

However, if the business still holds assets at the point of de-registration, this can be more complicated.

Why you may wish to de-register

There are several reasons you may wish to de-register your business from VAT.

For example, as mentioned above, you must de-register if you cease to make taxable supplies.

However, you may wish to de-register voluntarily if your taxable turnover falls below £83,000.

De-registering from VAT would mean that you would no longer have to charge VAT to your customers.  This would reduce your prices & in turn make your business more competitive.

Additionally, you would no longer have to complete VAT returns which could save you both time and money.

VAT de-registration and assets

If your business still holds assets or stock at the point of de-registration, usually you are deemed to make a vatable disposal of these.

This means that your business may have to pay VAT on the ‘disposal’ of these assets.

If the total VAT due on the disposal of these assets or stock is £1,000 or more, you must declare this deemed disposal to HMRC.

If the total VAT due on any sale of these assets or stock is less than £1,000, than you do not need to declare this to HMRC.

In order to determine this, you usually have to calculate the market value of these assets at the time of disposal.

Whilst for some assets such as a vehicle, this may be simple.  For others it may be much more complicated.

If you have any questions about VAT or VAT de-registration, please do get in touch.  Our team will be happy to answer any questions that you have.